Bitcoin Mining Sustainability Improvements

[Seabiscuit342]

(Originally posted in the Mining section, but I have since realized this is a better place on the forum for this question)

Hey y'all, just a question for the more tech focused part of this community (I come from an economics background). From my newfound understanding (feel free to correct me where I'm wrong), the way the mining works is by running the hashing algorithm over and over again until the correct number is found and that miner gets the reward. If you work in a pool, you get to distribute the risk of not finding that reward by spreading out the BTC when one miner in the pool finds it amongst the others in the pool. From an economic perspective, this is a problem as smaller pools are trading risk for no increase in expected reward. People will naturally gravitate towards the safer, larger pools as more consistent income without sacrificing expected reward, which makes sense from an economic sustainability perspective. Is there any way to design a hashing mining protocol that would make working with others in a pool costly? A large cost is not needed, but just enough that there is a trade off between tolerance for risk.

This could be as simple as a built in fee to break the reward among X miners that scales to the amount of miner addresses within the pool, or a new way of operating the bitcoin mining entirely. I am sure there would be drawbacks to any design proposed, but just was wondering if there were previous ideas, thoughts, or efforts in this direction to make the economics of small pool mining more feasible without ruining the integrity of Bitcoin.

[NotFuzzyWarm]

re the 1st post: Then you need to delete the original post as dupes are not allowed on the Forum... In the future you can also just move the post vs making another & deleting the 1st one.

That out of the way, you are missing the fact that statistically speaking in the long term, earnings from a 'small' pool *should* equal your earnings from a large pool. We are talking over at least 1 year here which will give the small pool time to find 1 or 2 blocks to give you a much larger % of the rewards + fees from those blocks vs the very tiny % per-block you earn on the large pools.

That said, I'm sure that there is a knee at some point in how small the pool can be before things tilt more towards the large pools.

[nc50lc]

-snip- This could be as simple as a built in fee to break the reward among X miners that scales to the amount of miner addresses within the pool, or a new way of operating the bitcoin mining entirely.

Unfortunately, that's entirely at the pool's software side.

As far as the Bitcoin network is concerned; how miners and pools work to find a valid hash isn't important
Because nodes only need to verify if the newly broadcasted block is valid, e.g.: its block header's SHA256d hash is lower than the target, etc.

The network doesn't know if it's from a pool with 15 miners, a huge pool with 1000 miners or a solo miner
aside from "hints" in the coinbase transaction that the miner/pool may include of their own accord.

[paid2]

this is a problem as smaller pools are trading risk for no increase in expected reward. People will naturally gravitate towards the safer, larger pools as more consistent income without sacrificing expected reward makes sense from an economic sustainability perspective --snip--

You have to take luck into account too. Mining in a small pool, if it has lucky blocks, can be extremely profitable for small miners. As the reward is divided in proportion to the hashrate over a given period, if a small pool has a string of lucky blocks, this can be good, even if we know that in the long term, luck always tends to be closer to 100% of course. It's almost a form of gambling; some did it with mmpool before it (probably) exited scam, others with kano pool or Laurentia pool for example.

So you're right, most of people want limited risk, but some consider the said risk goes both ways, not to mention those who want to support good projects for Bitcoin as a whole.

[gmaxwell]

There are costs-- beyond the health impact to the network, pools charge a fee, and it is extremely easy for pools to steal from miners and for miners to withholding attack the pools.